On June 20, 2016, the Supreme Court issued its awaited Cuozzo decision and gave strong deference to the U.S. Patent & Trademark Office (“Patent Office”) power (1) to make an unappealable determination to institute inter partes review (IPR) of an issued patent and (2) to make both procedural and substantive rules governing the IPR process, including what standard the Patent Office wants to use when construing patent claims in an IPR proceeding. The Court’s ruling on the specific Patent Office IPR regulations at issue here was generally expected. The broader impact of the decision may be the Court’s indication of how much power Congress gave the Patent Office to regulate IPRs.
In 2004, Cuozzo was granted a patent directed to a speedometer that shows when a driver is exceeding the speed limit. In 2012, Garmin filed a petition seeking inter partes review (IPR) of the issued patent claims. The Patent Office granted inter partes review of claim 17 based on Garmin’s arguments that Claim 17 would have been obvious based on prior art. The Patent Office also granted review of Claims 10 and 14 on the same grounds even though Garmin had not expressly raised that challenge as to those claims. The Patent Office reasoned that, because Claim 17 depended from Claim 14 that depended on Claim 10, the request for review of those claims was inherent in the request to review their dependent Claim 17.
The Patent Office later ruled that all three claims were invalid based on Garmin’s obviousness challenge where the Patent Office construed the claims under the broadest reasonable interpretation (BRI) standard that the Patent Office also applies when examining non-issued claims in original patent applications. The Patent Office had denied Cuozzo’s motion to amend the claims to avoid the prior art, because the Patent Office ruled such amendment would not avoid the invalidity grounds raised.
Cuozzo appealed the Patent Office’s decision to the Federal Circuit. Cuozzo argued that the Patent Office exceeded its statutory authority in granting inter partes review of Claims 10 and 14, because they were not identified in Garmin’s IPR petition as required by 35 U.S.C. §212(a)(3) –i.e.,. the IPR petition must state “with particularlity” the grounds for challenging the patent claims. The Federal Circuit, however, ruled that the Patent Office’s decision to institute the IPR was “nonappealable” under 35 U.S.C. §314(d).
Cuozzo also argued that the Patent Office erred in applying the broadest reasonable interpretation (BRI) standard in construing the claims during the IPR, rather than the potentially narrower claim construction standard used by district courts when litigating patent invalidity and infringement. The Federal Circuit, however, ruled that the Patent Office was operating within its rulemaking authority when it decided to use the BRI standard in IPR proceedings.
The Supreme Court affirmed the Federal Circuit’s ruling on both counts.
First, the Supreme Court ruled that the plain language of the statute provides that the Patent Office decision to institute an IPR is unappealable and there is no basis for deviating from that langauge here. The non-appealability provision of §314(d) states: “The determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable.” The Court cautioned, however, that the lack of judicial review applies to routine cases and there may be instances, such as constitutional questions, that may warrant judicial review:
[W]e emphasize that our interpretation applies where the grounds for attacking the decision to institute inter partes review consist of questions that are closely tied to the application and interpretation of statutes related to the Patent Office’s decision to initiate inter partes review. This means that we need not, and do not, decide the precise effects of §314(d) [non-appealability statute] on appeals that implicate constitutional questions, that depend on other less closely related statutes, or that present other questions of interpretation that reach, in terms of scope and impact, well beyond “this section” [i.e., the IPR statute]. Thus, … we do not categorically preclude review of a final decision where a petition fails to give “sufficient notice” such that there is a due process problem with the entire proceeding, nor does our interpretation enable the agency to act outside its statutory limits by, for example, canceling a patent claim for “indefiniteness under §112” in inter partes review. Such “shenanigans” may be properly reviewable in the context of §319 and under the Administrative Procedure Act, which enables reviewing courts to “set aside agency action” that is “contrary to constitutional rights,” “in excess of statutory jurisdiction,” or “arbitrary [and] capricious.”
By contrast, where a patent holder merely challenges the Patent Office’s “determin[ation] that the information presented in the petition … shows that there is a reasonable likelihood” of success “with respect to at least 1 of the claims challenged,” §314(a), or where a patent holder grounds its claim in a statute closely related to that decision to institute inter partes review, §314(d) bard judicial review.
The Supreme Court’s decision thus does provides some leeway and guidance for future attempts to appeal Patent Office decisions to institute an IPR.
Second, the Supreme Court ruled that Congress granted the Patent Office power to set both procedural and substantive rules governing inter partes review under 35 U.S.C. §316(a)(4), which states that the Patent Office has the authority to issue “regulations … establishing and governing inter partes review under this chapter.” The IPR statute does not direct the Patent Office to use a particular claim construction standard. In such instances of ambiguity or a “gap” in the statute, the court typically interprets a statute as “granting the agency leeway to enact rules that are reasonable in light of the text, nature, and purpose of the statute.” The Court ruled that the Patent Office’s use of the BRI standard in IPR proceedings was reasonable. The Court did not decide whether that was the most reasonable alternative, only that it was reasonable and Congress gave the Patent Office power to chose what standard to apply among reasonable alternatives:
Having concluded that the Patent Office’s regulation, selecting the broadest reasonable construction standard, is reasonable in light of the rationales described above, we do not decide whether there is a better alternative as a matter of policy. That is a question that Congress left to the particular expertise of the Patent Office.
The Supreme Court’s ruling, therefore, may spur interested parties to approach the Patent Office or Congress to consider a different claim construction standard for IPRs now that the decision of what standard to use has been taken out of the courts’ hands.
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